Is anyone else freaking out about debt? : Business School Life

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pelihu

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11 Apr 2007, 17:21

dukes wrote:

pelihu wrote:

Both federal and private loans are only available up to the total cost of attending right?

Yes, but "total cost" is objective. You can take out quite a bit in "living expenses." I've heard of people paying for engagement rings with their student loans (not officially). I budgeted for all kinds of travel and extras when I submitted my loan application.

Also, your federal loan amount will probably only cover a fraction of your overall cost.

Actually, that's what I mean. I don't think the student gets to say how much is budgeted for living expenses. I believe the school sets up an amount based on (I guess) federal guidelines. I remember looking at Columbia and they budgeted $1000 per month for rent for students, based on 2 people sharing a room. If someone wanted to spend $2500 on midtown apartment, they wouldn't be able to borrow the money to cover it.

I know federal loans will only allow you to borrow up to this school-set limit. I was wondering if private loans would allow you to go beyond.

Looking at Rhyme's analysis, I don't think it makes sense to borrow any more than you need to, even with the federal loans. I'm getting rid of my house and one of my cars, and making plans to live like a student for the next couple of years. No more vintage Bordeaux, back to cheap beer!

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12 Apr 2007, 04:29

Yea, pelihu, dont we have to share a light chablis '62 sometime?

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01 Jun 2007, 07:57

Hi,
Am new to this thread but this is what (me and wife) we have been
discussing, i have an admit in Simon Rochester and the whole cost structure is now giving us cold feet. we are very comfortable as on now on finances (making 90k/ yr tax free). based out of africa, i want to move to the developed world and work for a fortune 500 company and hence the MBA.

We have the money - 150k - but at the end of the MBA, our whole savings will be wiped off ( my age 37 and with 2 kids), so its a tough tough decison.

any advise ??

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01 Jun 2007, 08:26

pg47087 wrote:

Hi,
Am new to this thread but this is what (me and wife) we have been
discussing, i have an admit in Simon Rochester and the whole cost structure is now giving us cold feet. we are very comfortable as on now on finances (making 90k/ yr tax free). based out of africa, i want to move to the developed world and work for a fortune 500 company and hence the MBA.

We have the money - 150k - but at the end of the MBA, our whole savings will be wiped off ( my age 37 and with 2 kids), so its a tough tough decison.

any advise ??

Rochester is a reasonable place to live expense wise...tuition at most schools is about the same at 40K a year. So overall the cost out of your pocket will be less than a school in an expensive area. However, if you are making 90K a year tax free (assuming thats US dollars) you probably wont touch that coming out of Rochester right away. Salary wise you wont see a huge jump like someone making 50K and its going to be taxed so your take home is going to be less than what you make now.

It doesnt appear that you are motivated by the salary you will get post MBA since its not going to double your income and you are going to be paying taxes and post graduation will be living in a more expensive area than you live now I am sure. Your decision is more factored on your desire to move yourself and your children to America and the opportunities that gives you and your family. If you have the desire to move out of Africa and feel that you can't do it without an MBA don't let the money scare you. Do what is best for your family and the finances can be worked out.

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01 Jun 2007, 08:46

Hi riverripper, thank you for the frank insight. like you said , the $$ arent that important. it is abt moving out of africa - to safer place (??). MBA is the only good option but the worrying factor is that after the MBA what options are there and how is the job market in the usa for intl students. the last thing that i want to come back to africa after spending a cool 150k and 2 years of lost salary.

simon looks to be a decent school but guess the stakes are high for taking risk- at my age with big liabilities - 2 kids and wife....

man this is serios stress!!

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pelihu

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01 Jun 2007, 10:02

The consolation is that the MBA job market is very strong right now. The economy seems to be holding up, so hopefully that will continue for two more years as we try to secure permanent positions. You have the additional challenge of being an international student - it is becoming more difficult for people from other countries to secure jobs in the US.

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01 Jun 2007, 10:06

pelihu wrote:

You have the additional challenge of being an international student - it is becoming more difficult for people from other countries to secure jobs in the US.

Spot on !!!

Know few of my friends( International Students) from Ultra/Elite struggling to get a job of their choice !!! After spending 100K, the last thing one want is a unwanted job! Barring MC/IB not many sponsor H1b visa and hate to say IB is predominantly whiteman's club.( u might see few minorities as banks want to good look on diversity ratings)..so do your homework before going to any school beyond Ultra/Elite !
Also Keep in mind the H1b Visa Lottery that happened this year...

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01 Jun 2007, 13:18

naturallight wrote:

Is anyone else thinking about taking a federal student loan even though you don't *need* it?

Federal student loans have pretty decent interest rates, and plus you get to deduct the interest if you itemize your taxes (I think).

Can someone confirm their knowledge on the tax deductions of interest on student loans? I've been trying to do some research online - I've read that:
1) you are capped at $2500 in interest claims annually, and
2) the amount you can deduct depends on your salary (may be $0 for high earners)

Is this right? I always throught you could deduct allll the interest on student loans so was suprised to read this. I'm hoping I did not get the "complete picture". The cap just seems so little compared to the cost of an MBA...

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01 Jun 2007, 17:00

kharma wrote:

naturallight wrote:

Is anyone else thinking about taking a federal student loan even though you don't *need* it?

Federal student loans have pretty decent interest rates, and plus you get to deduct the interest if you itemize your taxes (I think).

Can someone confirm their knowledge on the tax deductions of interest on student loans? I've been trying to do some research online - I've read that:
1) you are capped at $2500 in interest claims annually, and
2) the amount you can deduct depends on your salary (may be $0 for high earners)

Is this right? I always throught you could deduct allll the interest on student loans so was suprised to read this. I'm hoping I did not get the "complete picture". The cap just seems so little compared to the cost of an MBA...

Judging by what most post MBA salaries are you wont be able to write off the interest, you are going to make too much money. I dont do my own taxes but from what I remember our accountant telling us, the amount you can write off reduces as your income increases from 100K to 130K in adjusted gross. I think its half that for single filers. You may be able to write it off your first year since you only will work about half a year...the only issue is bonuses could easily put you over the limit if you are going to a top school.

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02 Jun 2007, 07:03

kharma wrote:

naturallight wrote:

Is anyone else thinking about taking a federal student loan even though you don't *need* it?

Federal student loans have pretty decent interest rates, and plus you get to deduct the interest if you itemize your taxes (I think).

Can someone confirm their knowledge on the tax deductions of interest on student loans? I've been trying to do some research online - I've read that:
1) you are capped at $2500 in interest claims annually, and
2) the amount you can deduct depends on your salary (may be $0 for high earners)

Is this right? I always throught you could deduct allll the interest on student loans so was suprised to read this. I'm hoping I did not get the "complete picture". The cap just seems so little compared to the cost of an MBA...

This is true. I only get to deduct about half of the interest I pay on my undergrad student loans (and I'm not making close to MBA money right now). Its actually BS in my opinion. Why should you be able to write off the interest on the mortgage for your mortgage, but not on your student loans?

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02 Jun 2007, 07:48

riverripper wrote:

Paying for everything is my only concern about going back to school. The idea of attending grad school, studying hard, and all the long hours doesnâ€™t phase me. Giving up a few years in the work force actually is appealing at this point. Going into debt for school doesnâ€™t bother me, since it will pay off in the end. However, currently my wife and I own a house; we get by very comfortably, we enjoy our lives and still manage to save a decent amount every month. Going from two good salaries down to one, while our bills will stay pretty level is not a fun thought. Obviously a lot of our expenses beyond the necessities will have to be lowered but our mortgage, car payments, insurances, property tax, and utilities are going to stay the same. I am just afraid that we wont get enough to cover all our expenses and will have to either use up all our savings and sell off investmentsâ€¦or god forbid have to do an early withdrawal from my 401K

The real problem is my wife wants to keep our house, she loves it and I would like to keep it also. If we sold it that would make everything simple. (I am hoping to attend school in Boston since she doesnâ€™t want to leave her job and I donâ€™t want to do the long distance thing for two years. Besides a commute to Boston is very doable from where we live.) We do have a fair amount of equity in our home since I have been renovating it myself and bought it before the bubble in the northeast got totally over inflated. I am just concerned about how my school loans will work since our cost of living is really going to be different than someone renting an apartment in Boston. Our mortgage is definitely a lot higher than what the typical one bedroom costs. My wifeâ€™s income is good but it wont cover all our costs. We have savings but once again owning a house I donâ€™t want to spend down what we have because if something like the boiler or the roof goes then thatâ€™s going to be a huge chunk of money out of pocket. I am of the mind that I want to keep a safety net of a pretty good amount because of the house.

I havenâ€™t talked to any financial aid officers but I am sure they have seen it all beforeâ€¦so hopefully a few conversation about this will lower my stress level.

We were (are) in the same boat. I sold my current place in downtown Chicago, a placed I loved dearly - it wasn't an easy decision... The reason I did it is that it allowed me to pull out enough money to pay for tuition, books and medical for 2 years. On top of that, it leaves enough to give myself a monthly stipend to live on (on top of my wifes income), while still leaving a little bit left over come graduation

We bought a place for substantially less further north and although pulling all that equity out of the house actually makes the new place up north slightly more expensive per month, the cash infusion makes it far easier to face that mortgage payment than if it were on my wifes income alone. The neighboorhood is also more reasonably priced in general - drinks/food/etc - will all be a little lower.

Did it make sense to pull out equity to end up paying more in mortgage? The issue I faced was that my mortgage payment was low for the amount of space I had / where I was - we thought about renting, but even that would have been more than our mortgage payments. So the dilemma became: "Keep a low mortgage payment but have no money to pay it without taking student loans" or "Have a slightly higher payment but have money to pay it."

So, when it came to choosing between 8% (non-us citizen here) maybe-deductible-but-only-if-i-dont-make-too-much student loans to cover my tuition and expenses, and 6% fully deductible interest of a mortgage loan, I chose the mortgage.

There's also the simple argument that my old mortgage plus student loans would have exceeded the cost of my new mortgage.

Finally, I'm also a person who has all three FICO scores over 800 - I keep a close eye on my credit. In my experience, mortgage debt is "preffered" debt to student debt in credit algorithims (the reason is that you have a reason to pay it).

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Re: Is anyone else freaking out about debt? [#permalink]

02 Jun 2007, 09:02

amorica wrote:

It just hit me all of a sudden..I was elated about getting into a couple of schools..this has been a long and hard process. But where my primary focus had been just getting into schools, I know find myself contemplating the potential debt I will incurr. Its putting a damper on me right now. Anyone else feel the same way?

You bet its freaking me out. What I calculated is in the attached excel sheet. I guess its a little simpler for unmarried blokes like me... I'm thinking of going all out and repaying in 5 yrs - and getting back to India. Meaning I need a job, and a good one - any recent stats regarding recruitment of international students?

I recently heard of a undergrad batchmate at McCombs who was having trouble landing a job... :oops:

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02 Jun 2007, 12:03

https://www.gmatclub.com/phpbb/viewtopic.php?t=41533

Coming late to this conversation, but this link has lots of info on education expenses and income taxes.

The announcement at the top of the B-School Life section has tons of finance info.

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03 Jun 2007, 06:54

Riverripper, Dukes and aaudetat - thanks much for your replies.

Based on that - this absolutely sucks. It's so unfair - not getting the educational tax break just cuz you happen to get a higher paying job upon graduation. It's not like I didn't live off of no income during my school years as well! Bah - nothing I can do, sigh.
Thanks anyways!

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02 Jul 2007, 09:22

Quote:

We were (are) in the same boat. I sold my current place in downtown Chicago, a placed I loved dearly - it wasn't an easy decision... The reason I did it is that it allowed me to pull out enough money to pay for tuition, books and medical for 2 years. On top of that, it leaves enough to give myself a monthly stipend to live on (on top of my wifes income), while still leaving a little bit left over come graduation.

That's insane to me. We own a house in Detroit and will be lucky to get what we bought it for four years ago. Then you consider we put in some money to fix it up, and I did a lot of work on it myself, and it makes me sick. Glad some people are making out on their investments.

rhyme

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02 Jul 2007, 10:10

09App wrote:

Quote:

We were (are) in the same boat. I sold my current place in downtown Chicago, a placed I loved dearly - it wasn't an easy decision... The reason I did it is that it allowed me to pull out enough money to pay for tuition, books and medical for 2 years. On top of that, it leaves enough to give myself a monthly stipend to live on (on top of my wifes income), while still leaving a little bit left over come graduation.

That's insane to me. We own a house in Detroit and will be lucky to get what we bought it for four years ago. Then you consider we put in some money to fix it up, and I did a lot of work on it myself, and it makes me sick. Glad some people are making out on their investments.

Well, if it makes you feel better, I just sunk almost $20K into the new place we bought. Hardwood floors throughout, new canned lights, new light fixtures everywhere, new mantle, new paint throughout, built in shelving for dvds and stuff, plasma + wall mount, new custom closets throughout, new vent covers, etc...

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02 Jul 2007, 10:31

Not really, just glad that you can enjoy it, but thanks for trying. Enjoy the plasma; I'm slowly grinding down my wife's resistance and plan to pick one up in the fall to replace the tube style hdtv. Once you get hdtv, there's just no going back.

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02 Jul 2007, 10:31